QUESTION AND ANSWER SECTION
Operator: [Operator Instructions]. And your first question comes from Mark Argento of
<Q Mark Argento>: Hi. Good morning, guys.
<A Mark Layton>: Good morning, Mark.
<Q Mark Argento>: Nice quarter. Just some thoughts around I know you talked a little
bit about the pipeline value, roughly $40 million on the services side. Can you just talk about how
thats trending? I think that might be up from last time you disclosed the number. And maybe talk a
little bit about the types of companies youre that are looking at potentially signing up for
services and potentially the scope of those customers as well?
<A Michael Willoughby>: Sure. I think that in the last conference call we mentioned a
number of over 30 and so, this is a pretty good increase in the value of our pipeline from the last
conference call, which was very exciting for us. The mix, if you look at clients that are in the
pipeline, I think is fairly consistent, quarter-on-quarter. There are a number of the CPG type
opportunities, which once again were excited about and we also think as directly points to the
announcement of the P&G relationship is generating that interest.
We see continue to see quite a lot of fashion, apparel and accessory opportunities here in the
U.S., brands that are representing those. And then, something that actually has grown a little bit
over the past quarter in value, in the pipeline is fragrance and beauty, seem to be in a cycle
where between re-platforming efforts that are going on out there from first or second-generation
sites to more modern sites as well as brands that have not yet gone online directly seem to be
entering the marketplace and looking for solutions, so thats a bit of a growing segment in the
And then finally, I would say that over the past six months and certainly three months, weve seen
an increase in the interest of companies that have a global perspective on eCommerce and that are
interested in our services, because we have a global offering and we are able to take them online,
not only here in North America, but also in Europe. And I believe that we have the ability to
extend our solution effectively into even the Asia Pacific area. And so, as we deal with customers
that are looking at a global solution, once again were down to just a very few competitors,
primarily us and our direct competitor in the market, able to offer that global solution. So
thats, maybe the couple of drivers behind the pipeline growth.
<Q Mark Argento>: Thats helpful. And can you talk a little bit about the different
economic models that youre utilizing in the on the services side? I know some are pure
services-based, some have a buy/sell component to it. Do you expect to do, its kind of a little
of each or do you see predominately moving in one or the other directions?
<A Mark Layton>: Well, it depends on the channel. I think what were seeing this is
Mark. We have, in terms of clients in the pipeline today, I would say still the larger majority of
the numbers of clients in the pipeline are pure Service Fee relationship deals, where our targeted
gross margins are in the 25 to 30% range with those particular clients, depending on deal size and
scope of activities that were performing. But we have seen certain channels where they just, as I
mentioned in my prepared comments, theyve just got a lot more comfort with the idea of a buy/sell
Some of these companies have never developed capabilities to handle things like consignment
inventory. So, as they begin to address business controls and software capabilities, its basically
a void in their capabilities as it is for now. So if they head down a consignment inventory route,
what they end up with is cost and lead time that delays their ability to be able to launch the